Description: In preparing claims reserves in the annual statement, health insurers and their opining actuaries will generally include a provision for adverse deviation (PAD) in their reserved amount in order to satisfy language in both in the National Association of Insurance Commissioners (NAIC) Health Annual Statement Instructions and in Actuarial Standards of Practice. This article explores the total level of PAD (both implicit and explicit margin combined) included in the reported claims reserves by examining NAIC filing data from 2016 through 2022.

Description: A review of model inputs, suggested methods to getting comfortable with the data that your model is using, and data validation lessons

Description: This article highlights the fact that new requirements for disclosure of average liability duration and interest rates could lead to diversity in practice. It also recognizes that elements of the new disclosure requirements will enable financial statement users to perform their own crude estimates of these averages in ways that could help them to better understand the liabilities and to compare companies using consistent methods. Finally, the article describes how companies might also find value in such crude estimates.

Description: S&P reissued a second Request for Comment (RFC) in May 2023 that proposed changes to their insurer capital adequacy methodology and assumptions, and suggested these proposed changes may become effective at the end of 2023. This paper is to highlight the notable changes between the current capital model criteria and the proposed model. We also discuss major changes from the first RFC and the second RFC, as well as several key items that still require enhanced guidance and clarification. Our analysis is based on information gathered from S&P's public comments, conversations with industry participants, and publications released by S&P Global as of July 2023 when this paper was written. Most U.S. life insurers are rated by S&P using their U.S. Life Statutory Capital model, while other insurers use the GAAP/IFRS Capital Model. Statutory financials will remain the starting point for U.S. life insurers under the proposed model, however there will be additional adjustments made to these numbers in an effort to create consistency and comparability with other accounting and solvency regimes.

Description: How does mortality experience impact earnings under the new GAAP financial framework? This article discusses how to isolate key components from financial models related to decrements, as well as how to handle the changes in the financial reporting landscape including: the aggregation of insurance policies into cohorts, dynamic reserving, and the limitations imposed by caps and floors. Looking at the components of earnings, such as the present value of benefits, expenses, and premiums, and how these elements interact is critical to form a comprehensive earnings story.

Description: Presents a step-by-step methodology for calculating confidence intervals for IBNR estimates derived using the Averaqe PMPM method. It is a companion article to the January 2023 Health Watch article presenting the Average PMPM method for generating point estimates of IBNR with zero claims runout.